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This increase in transit volumes on the Eurasian rail route is mostly attributable to the attacks on ships in the Red Sea and the resulting instability in the sea freight segment. Against this backdrop, major sea shipping lines suspended operations on the shortest sea route through the Suez Canal and have been sending their ships around the African continent. This detour around the Cape of Good Hope not only extends transit times but also raises shipping rates and incurs additional costs. As a result, European and Chinese consignors are increasingly seeking shorter delivery times at stable prices, prompting a partial shift from maritime shipping to rail services.
China-EU trade forms one of the main axes in the freight shipping industry in terms of transport and logistics, which gives special importance to the stable operation of the transport system within the China — Europe — China freight service.
The Yemeni Houthis have been targeting ships navigating the Red Sea, resulting in a significant crisis in freight shipping through the Suez Canal. This forced shipping companies to divert their container ships around Africa through the Cape of Good Hope, leading to a significant increase in transport costs. Coupled with high demand for shipping services ahead of the Chinese New Year in early 2024, container shipping costs by sea reached $3,673 per FEU, according to the WCI Drewry index. This indicator for maritime shipping seemed to have peaked out in February before declining all the way down to $2,750 per FEU in April, but this trend failed to materialise. In fact, the shipping rates resumed their growth and surged to $5,085 per FEU in June, with the WCI for the Shanghai-Rotterdam segment reaching $6,720 per FEU as of the end of the month. This surge was attributable to several factors, including an increase in demand, reduced capacities and a deficit of container equipment, as well as unfavourable weather conditions in Asia in early May, which made navigating the seas more challenging.
While the maritime shipping sector experienced all these disruptions, favourable conditions on the Eurasian rail route have led to a significant shift of freight from sea to rail.. The rising shipping volumes by rail, coupled with the increased pressure on the sector, led to a marginal rise in the ERAI index, which measures the cost of transporting a container across the 1,520 mm wide-gauge railway network from border to border. Since the beginning of 2024, the index has increased by 6.6%, reaching $3,289 per FEU.
ERAI Composite and WCI Drewry dynamics
Key traffic indicators and growing cargo flows
The Eurasian rail route has achieved record-high transit volumes during the first half of the year, largely due to the low rate volatility and the reliability of freight shipments, especially in light of the instability affecting transits through the Red Sea. Freight traffic on the Eurasian rail route in the first six months of 2024 totalled 362 thousand TEUs, up 11.3 thousand TEUs compared to the same period of 2023, with transit traffic volumes for the China-EU-China freight segment accounting for 52% of all shipments at 189 thousand TEUs. Therefore, trade by rail between China and Europe increased by 66% compared to the first half of 2023.
Key destinations on the Eurasian railway transit route in January — June of 2023 and 2024
Overland container transits through Russia, Belarus and Kazakhstan as part of the Eurasian rail route keep growing sanctions notwithstanding, especially dispatches from China to Europe. In the first half of 2024, freight transits increased by 121% to 163 thousand TEUs. At the same time, the volumes in the opposite direction, i.e. from Europe to China, continued to decline, with a 35% decrease in the first six months of 2024 to 26.2 thousand TEUs. This trend had a negative impact on the overall balance and the shipping costs on the route. However, the fact that ERAI Composite index only had monthly fluctuations ranging from 0.9% to 5.5% demonstrates that the Eurasian rail route offers a stable and affordable option even in such uncertain times.
To understand how the disruption in sea navigation affected the overall statistics, we must consider the monthly breakdown for freight shipping volumes within the China-Europe-China segment in the first six months of 2023 and 2024. Chinese New Year celebrations in February tend to produce a slump in demand for freight transits in both directions. However, February 2024 registered a significant increase in shipments by rail as more freight switched from maritime to rail transport.
Source: Eurasian Rail Alliance Index.
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